Moving from shareholder to stakeholder value : an investigation into blockchain and its ability to govern common pool resources and incentivize collaborative behavior

Abstract: The transgression of Earth’s nine planetary boundaries is a phenomena that will have consequences shared by us all. Contemporary political and economic paradigms vow for the substitution of Earth’s limited natural capital with growing human capital for our self-aggrandizing interests. Based on the lack of collective action towards sustainability, international bodies such as the Intergovernmental Panel on Climate Change (IPCC) and the United Nations (UN) are urging countries to act. Just recently, the UN released the Sustainable Development Goals (SDGs), 17 cross-sectoral goals to aid countries in the process of achieving a sustainable state, to serve as a blueprint for future progress. Achieving these goals will require the commitment and collaboration of stakeholders from across a wide range of disciplines. Indeed, while being a first mover has traditionally burdened a stakeholder with more risk, a core tenet of the SDGs is to induce more countries to weigh this individualized risk against the risk we all face with collective inaction. As our natural commons come under peril from various entities alike, there is a need for a global hegemonic institution to incentivize selfless action for the preservation of limited resources. The Ethereum blockchain, which is innately selfless, is a general purpose technology which could provide the necessary framework needed to collaboratively govern a common resource. The Ethereum Virtual Machine in particular is an operating system built on this technology for executing software in a distributed fashion. Smart contracts within the Ethereum ecosystem can facilitate a trust of outcomes between parties that before was only admissible by partisan handshake agreements. Stimulating collective action for the SDGs is paramount, and smart contracts, using globally distributed architecture, game theory, cryptographic security, and software determinism have the ability to not only automate agreements that developers may come to, but also guarantee trust that these agreements follow through as promised by using tokenized incentives. As a result, this enables a new paradigm for the scaling of collaborative governance and economics. The Ethereum platform is a nonpartisan institution, where developers are incentivized to design software collaboratively, and in turn, are able to program trust as a fundamental unit in all applications, effectively paving the road to cooperative stakeholder business models. Based on limitations within blockchains, oracles are identified as a key layer which can record externalities and allow for development of many independently governed common resource applications. To exemplify a unique application of a collaborative business model, LO3 Energy is analyzed as a decentralized application case study to show how individuals can collaborate using incentivized token mechanics in order to realize a shared goal, clean and efficient energy use. As we look toward the future of sustainability, public blockchain infrastructures such as Ethereum, along with oracles, can facilitate collaborative economies of scale, where all network participants share in the creation of value.